Security forces in Spain and Gibraltar were last night hunting for at least one IRA bomber, hand guns, and 140 lb of plastic explosives after the revelation that the car left in the colony by the three terrorists shot dead on Sunday had not contained a bomb.

Sir Geoffrey Howe, the Foreign Secretary, told the Commons that earlier official reports of a 500 lb bomb being defused by British army experts had been wrong. He also said that the three had been unarmed. There were claims last night from eyewitnesses in Gibraltar that the trio, Daniel McCann, aged 30, Mairaed Farrell, 31, and Sean Savage, 24, had been shot in cold blood.

Before Sir Geoffrey made his announcement the IRA, in a claim underlining the continuing danger, said that the car bomb contained Semtex plastic explosives and that other members of the gang were still at large. Official sources said after the shooting that a car bomb had been found and appeared to have been intended for an attack on the Royal Anglian Regiment, due to take part in a changing of the guard ceremony today. Sir Geoffrey acknowledged that a fourth member of the gang had been seen but not traced. In Gibraltar the deputy governor, Mr Ron Sindon, said he believed no IRA members remained in the colony. The search had switched to Spain, where several people with Irish connections were being hunted.

The second of three cars which police were looking for has been found on the Spanish side of the border. It contained false passports and equipment including an alarm clock.

An account of the deaths at variance to that provided in the Commons was given by Mrs Pepi Celecia, a housewife in Gibraltar , who said the three had been shot "in cold blood" by a man presumed to be a member of the British security forces. Mrs Celecia, who lives near a petrol station in Winston Churchill Avenue, was looking out of her window at about 3.30pm on Sunday. "I was watching a couple walking down the road in the direction of the border," she said, "when I saw a blond man come up behind them and, without any warning, he shot at them. The woman, who was carrying a large shoulder bag, fell to the ground immediately. The young man, in a white tracksuit and running shoes, staggered towards the service station. The man fired at him four or five times more and he collapsed with blood all over the place."

She said a police car had roared up to the gunman, who immediately jumped in. The car did a U-turn and sped away. "It was quite a while later before other police cars and ambulances arrived."